April 14, 2009

For a long time, I've been asking this rude question that nobody else in the country seems to be interested in: What percentage do minorities account for of all the mortgage dollars that went into foreclosure in 2007-08?

There's no single database anywhere that lists mortgages and foreclosures by race / ethnicity. Databases that contain that information need to be carefully constructed by matching disparate information, such as individual mortgages in the federal Home Mortgage Disclosure Act database, which are listed by race, with foreclosure records of local county sheriffs or registrars of deeds. So, this has to be done on a local basis.

The Big Enchilada of the mortgage meltdown was, of course, California, but the foreclosure studies that are now trickling in tend to be from areas peripheral to the Ground Zero. For example,

The first social scientists to do this were Gerardi and Willens of the Boston Fed for all subprime loans in Massachusetts. They found that Non-Asian Minority subprime borrowers tended to default at about twice the rate of white subprime borrowers, with blacks worse than Hispanics.

For the city of Minneapolis, he matches foreclosures from the sheriff's office with race and language-spoken at home data from the Minneapolis Public Schools, so he's just focusing on foreclosed households with a child in public school. One complicating factor is that he looks both at foreclosed homeowners and at renters who get evicted because their landlord is foreclosed. He doesn't have data on the race of the landlord, so I'll just look at the owner-occupiers.

Compared to most big cities outside of the Pacific Northwest, the city of Minneapolis is still quite white, with white households accounting for 48% of Minneapolis Public School students. being white.

Foreign-language speaking households accounted for 32% of foreclosures on "homesteading" (i.e., owner-occupying) homes among parents of Minneapolis public schoolchildren. Among this 32%, 65% were Spanish-speaking, 15% Hmong, 4% lowland Laotian (like Kang on "King of the Hill"), 6% Somali (Avast!), and 9% other.

Among the 68% of homeowners with public school children who got foreclosed who were English-speaking, probably somewhere around 75%-80% were NAMS (primarily black).

Until now, there hasn't been much solid data on who in Minnesota has lost homes to foreclosure. A recent University of Minnesota study finds the majority of owner-occupied foreclosures in Minneapolis involved Spanish-speaking families.

St. Paul, Minn. — Longtime real estate broker Rolando Borja saw the foreclosure crisis coming. His clients are mostly Spanish-speaking, and he said that community is especially vulnerable to predatory lending because most business relies on word of mouth.

"They told their cousin and their friend and their compadre and this and that, not realizing that the deal they just made was a bad one. And you know," he said, "they told ten people and those ten people told another ten, so we are talking about it was like a disease. It started spreading and it happened like that."

Experts say one reason for the increase is that subprime loans were heavily marketed to vulnerable groups.

Brokers canvassed churches, schools, advertised in Spanish-language media and went door to door. As a result, Borja said, lots of people took out risky loans they didn't understand to buy homes they couldn't afford.

"All these funky programs started coming out on the market," he said. "Pretty much anybody could buy a home,"

The University of Minnesota is the first to study the ethnicity of people caught up in the foreclosure crisis. The study linked two years' of data from Minneapolis sheriff's sales with public schools enrollment data, which tracks ethnicity and language spoken at home.

The data, from June 2006 to July 2008, paints a grim picture of the early stages of the current housing crisis. By far, more African-Americans and Hispanics lost their homes than any other groups. Most of the foreclosures were rental properties. That's already widely understood.

But here's what surprised the study authors: among homeowners, the foreign born lost their homes at a much higher rate - and the majority were Spanish-speaking.

"There is not a part of the city that's unaffected; there is not a part of the city where you didn't see foreclosed properties that had a foreign-born family living in them," said University of Minnesota Professor Ryan Allen, who authored the study.

Ryan said that while the numbers were surprising, they are nonetheless pretty easy to explain. Immigrants are thought to be vulnerable to predatory lending because of language barriers.

People who are foreign-born may also be less familiar with mortgages. In Latin America for example, buying a home usually means putting down all the money up front and buying the land where you want to build.

Another reason has to do with lending disparities. Studies have documented that minorities are more likely to borrow adjustable rate mortgages because they are more often turned down for prime loans. ...

"People who are saying, 'Yes, you can get into a home,' and it's homebuyers who don't have enough information to make an educated decision as to whether or not homeownership is the right thing for them," she said.

Clearly the Minneapolis brokers haven't taregtted the Somali cab driver/non-bacon scanning Target employee market heavily enough. That should make up for losses among the Hispanic population, and when the Somalis fall behind on their payments they can resort to piracy to make up the dif. There's plenty of lakes in Minnesota from which to do that.

I would be willing to bet a months pay that they people who sold these loans were of the same ethnicity and spoke Spanish. I am a 7th generation American in financial services. Immigration has not been a big boom for my business. The newbies usually get picked off by people who network (prey) within recent immigrant groups well before I ever get them. All they are to me is a drain on my tax money and public services.

But here's what surprised the study authors: among homeowners, the foreign born lost their homes at a much higher rate - and the majority were Spanish-speaking. That sentence speaks volumes about the shallow thinking going on in what's supposed to be our intellectual circles.

So, the lesson here is that uneducated manual laborers transacting business within a legal and financial system they didn't understand, and signing contracts in a foreign language, were pretty easy to scam. Now, who could possibly have seen *that* coming?

An odd detail about Hispanic Minnesota: except for a tiny Mexican community in St Paul which goes back about a century, there has been almost no Hispanic presence in the Twin Cities until the last 20 or 25 years. But plenty of the state's small towns have generations of experience with seasonal migrant workers. Ironically, the farm kids who move into the city have a lot more knowledge about the subject than do their urban neighbors.

As for Somalis, they've been trading with the Arabs for over a thousand years. They've learned to spot a fraud a mile away!

The Hmong, our other favorite demographic, have bred so fast, the majority of them are now native.

One thing to remember is that although the predatory lenders are routinely castigated, I don't recall any of them being prosecuted for their lending practices. I have heard on talk radio that is because they were following the law, not breaking it, when lending. They were required to lend because the so-called regulators, the real overlords in this case, wanted more minority mortgage holders. Presumably this would lead to a dream-like happy ending. But as we now see this did not happen. Crash-a-roo, I see you.

What percentage do minorities account for of all the mortgage dollars that went into foreclosure in 2007-08?,I've recently been wondering what percentage of state and federal tax income as compared to state and federal outlays various races account for.

Subprime loans were aggressively sold to minority community members by non-bank lenders, despite the fact that many of whom would have been eligibile for prime loans from bank lenders based upon credit and income. It is not much of a surprise that foreclosures are higher on these ill underwritten and high interest (and hence harder to pay down) loans, often with prepayment clauses that complicate refinancing solutions.

Subprime loans were aggressively sold to minority community members by non-bank lenders, despite the fact that many of whom would have been eligibile for prime loans from bank lenders based upon credit and income...Lower pressure marketing in white communities probably meant less dubious underwriting and appraisal practices. In short, isolation of communities from legitimate financial institutions produces more bad loans.Ummmm, what? One does not follow from the other. Subprime may have been "aggresively marketed" n minority communities, but they were so marketed because these people did not qualify for better loans with better rates. If people can't be relied upon to seek out the best deal for the most expensive purchase they will ever make what the hell can you do? And how were they "isolated" from legitimate institutions? So they had to drive a mile or two further to find the nearest Wells Fargo?

Homogenous locations like Minnesota have been targeted by the US State Dept for mass alien immigrant penetration. And that sort of policy is not much different from Stalin moving around populations in the USSR in order to sow ethnic discord and keep everyone on their toes.

See, the elites are actually obsessed with genetics and demography, because they realize how powerful those forces are. Meanwhile at the same time they have made those issues out of bounds for discussion in polite society.

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